Stafford Student Loan News

The answer is yes and no. It just depends on which federal loan you have been awarded.

For the Perkins loan, which are federal loans provided thru your school, the answer is no. There are no additional fees. If you are awarded $2,500 than the entire amount is yours.

If you have a Direct Subsidized or Unsubsidized Loan a 2% origination fee is attached which is taken right off the top of the amount you were approved for. For example if you are awarded $5,500 than $5,390 will be sent to the school when you deduct the 2% fee.

The Direct Plus loan has a 4% origination fee.

FFEL loans have fees as well, but they vary from lender to lender. They can range from 2% on the Stafford Subsidized and Unsubsidized loan to 4% on the Plus.

Here at Staffordloan.com we have zero fees for Stafford loans and 3% fees for Plus loans. For a Stafford loan (click here) and for a Grad Plus loan (click here) and for a Parent Plus loan (click here).

I can’t tell you how many students wind up with a defaulted student loan simply because they never got their monthly payment reminder in the mail. And by falling into default they end up having to pay back thousands more in late fees and interest. Don’t fall into this trap!

It is so easy in life to make excuses - to pass the buck - to blame someone else. It takes a person with character to stand up and take responsibility. Just because your lender or servicer has not sent your monthly invoice doesn’t mean you don’t have to pay your loan back. When you borrow stafford loans to finance your education you are also promising to pay them back. That is what your master promissory note is for. Billing statements are merely sent as a convenience. Sure, ignorance may be bliss for a while, but when they finally catch up with you it won’t be pretty.

Just remember your loan repayment begins six months after you either take a leave from school, fall below a half time status as defined by your school, or graduate. For most they graduate in May so by turkey time those graduates should be receiving a bill, but again, not all will.

We are defined by the choices we make in life. Don’t get off on the wrong foot by letting your loans fall into default and then blaming your lender. Be proactive instead of reactive and make it happen!

If you are unsure who your lender is you can contact the Department of Education at 800-433-3243 or log on to http://www.nslds.ed.gov/nslds_SA/.  Please note you will need your 4-digit FAFSA pin number to access your information online.

If you are in need of a stafford loan (click here).

As most everyone knows the FAFSA is the key that opens the financial aid door, but which parent gets listed on the FAFSA for a dependent student after a divorce is the million dollar question.   Is it the parent earning the most money?  How bout the one earing the least?  What about both?

The answer is…drum roll please…the parent you lived with for the greater amount of time during the 12 months preceding the date you file your FAFSA application.

If you didn’t live with either parent, or you lived with each parent an equal amount of time, then use information about the parent who provided the greater amount of financial support during the 12 months prior to the date you file your FAFSA application.

If you didn’t receive any financial support during that time than you must report information about the parent who most recently provided the greater amount of parental support.

To begin let’s first delineate the difference between a subsidized and unsubsidized loan.  If you received a subsidized loan for school NO interest will accrue while you are in school, sweet!  If however you have an unsubsidized loan than you are not so lucky.  Granted you could elect to make interest only payments if you so choose while in school, but if you don’t than that interest, which capitalizes quarterly, could spiral your student loan debt out of control.  Let’s take a look how.

So what is capitalized interest exactly?  When the interest is not paid, it is capitalized or added to the principle balance, which increases the outstanding principle amount on the loan.  Interest that is capitalized  and, therefore, has been added to the original amount of the loan subsequently accrues interest, adding an additional expense to the loan.

Here is a visual.

Loan amount: $1,000.

Interest per month: $10

Loan balance after 3 months: $1,030

Then that $1,030 loan balance is used as the new benchmark instead of  $1,000.  Now the monthly interest may go up to $10.10.

This was just a very basic visual used to demonstrate the capitalization concept.  Actual balances and interest rate calculations may vary.